Custom, Excise & Service Tax Tribunal
M/S. I.O.C. Ltd vs Commissioner Of Central Excise, Patna on 30 March, 2010
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL, KOLKATA
EASTERN ZONAL BENCH: KOLKATA
Appeal No.EDM-819/04
(Arising out of Order-in-Original No.11/M.P./Commissioner/2004 dated 24.09.2004 passed by the Commissioner of Central Excise, Patna.)
FOR APPROVAL AND SIGNATURE
HONBLE SHRI S.S. KANG, VICE PRESIDENT
HONBLE SHRI S.K. GAULE, MEMBER(TECHNICAL)
1. Whether Press Reporters may be allowed to see
the Order for publication as per Rule 27 of the CESTAT
(Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the
CESTAT(Procedure) Rules, 1982 for publication in any
Authorative report or not?
3. Whether Their Lordship wishes to see the fair copy
of the Order?
4. Whether Order is to be circulated to the Departmental
Authorities?
M/s. I.O.C. Ltd.
Applicant (s)/Appellant (s)
Vs.
Commissioner of Central Excise, Patna
Respondent (s)
Appearance:
Shri S.K. Bagaria, Sr.Advocate, Shri Partha Banerjee, Advocate & Shri Saurabh Bagaria, Advocate for the Appellant (s) Shri A.K. Sharma, Authorised Representative(JDR) for the Respondent (s) CORAM:
Honble Shri S.S.Kang, Vice President Honble Shri S.K. Gaule, Member(Technical) Date of Hearing:- 30.03.2010 Date of Pronouncement :- 30.03.2010 ORDER NO.
Per Shri S.S.Kang.
1. Heard both sides.
2. Appellant filed this Appeal against the impugned order whereby demand of interest under Section 11AB of Central Excise Act read with Rule 12 of CENVAT Credit Rules, 2001 and 2002 was confirmed.
3. Briefly stated the facts of the case are that the Appellants are engaged in the manufacture petroleum products and were availing credit in respect of capital goods. Appellant received capital goods in their factory in the year 2000 and availed 50% of the credit. In the month of April, 2001 and April, 2002 Appellant availed the remaining 50% of the credit in respect of the capital goods. Show Cause Notice was issued to the Appellant for denial of 50% credit on the ground that 50% credit which was to be taken in subsequent year was taken prior to installation of the machines i.e. capital goods and demand of interest was also made in the Show Cause Notice. The adjudicating authority held that 50% remaining credit was taken in subsequent financial year before the capital goods were put to use and the capital goods were actually put to use after taking of credit hence allowed the credit however demanded the interest in respect of the credit taken and utilised before the capital goods were put to use.
4. The contention of Appellant is that during the period in dispute i.e. 2001 and 2002 as per the provisions of Rule 4(2B) of CENVAT Credit Rules provides that the balance of CENVAT Credit may be taken in any financial year subsequent to the financial year in which the capital goods were received in the factory of manufacture if the capital goods are in possession and use of the manufacturer of final product in such subsequent year. The credit was availed in the subsequent financial year in which the capital goods were put to use therefore the demand of interest is not sustainable. The contention is that the finding of the adjudicating authority that balance of CENVAT credit is to be taken after the capital goods were put to use is clear violation to the provisions of the Rules. The capital goods in respect of which credit was availed were in possession of the Appellant and they were put to use in the same financial year in which the credit was availed is compliance with the provisions of the above-mentioned Rule. The Appellants submitted that prior to CENVAT Credit Rules 2001-2002 as per the provisions of the Erstwhile Rule 57Q the credit cannot be taken on a date prior to the date of installation. The contention is that in this Rule there was a clear condition that credit cannot be taken prior to installation and use. However, in the CENVAT Credit Rules 2001 and 2002 the provisions were made to the effect that 50% of credit can be taken at the time of receipt of the goods in the factory of production and balance of CENVAT Credit can be taken in subsequent financial years in which the capital goods were received if the capital goods are in possession and use of the manufacturer of final product in such subsequent year. The Appellant stressed on the words in such subsequent year to say that the capital goods are in possession and use in the financial year in which the balance credit has been availed hence the impugned order saying that credit cannot be availed before the machines are put to use is not sustainable. The Appellant also submitted that the effect must be given to the clear meaning of the words as provided in the Rules and for this the Appellant relied upon the decision of Honble Supreme Court in the case of Hemraj Gordhandas v. H.H. DAVE, Assistant Collector of C. Ex. & Customs 1978 (2) E.L.T. J 350 (S.C.) and other decisions of the Honble Supreme Court to this effect. On merits Appellant relied upon the decision of the Tribunal in the cases of Ballarpur Industries Ltd. v. Commissioner of C. Ex. & Cus., Nagpur 2003 (156) E.L.T. 423 (Tri.-Mumbai), Goyal M.G. Gases Pvt. Ltd. v. Commissioner of C. Ex., Ghaziabad 2004 (168) E.L.T. 369 (Tri.-Del), Parasrampuria Synthetics v. Commissioner of Central Excise, Jaipur 2004 (170) E.L.T. 327 (Tri.-Del.) and Ispat Industries Ltd. v. Commissioner of Central Excise, Raigad 2006 (199) E.L.T. 509 (Tri.-Mumbai).
5. Revenue submitted that as per the clear provisions of the CENVAT Credit Rules the credit is to be taken in any financial year subsequent to the financial year in which the capital goods were in possession and put to use and relied upon the decision of the Tribunal in the case of Commissioner of Central Excise, Mumbai-II v. Fiat India Pvt.Ltd. 2009 (240) E.L.T. 620 (Tri.-Mumbai). Revenue also relied upon the decision of the Honble Supreme Court in the case of Commissioner of Central Excise, Bhavnagar v. Saurashtra Chemicals Ltd. 2007 (212) E.L.T. 7 (S.C.) and the decision of Honble Rajasthan High Court in the case of Hindusthan Zinc Ltd. v. Dy. Commissioner of C. Ex. & Cus., Bhilwara 2007 (220) E.L.T. 50 (Raj.).
6. In this case the dispute is in respect of 50% CENVAT Credit availed by the Appellant in subsequent year. The case of the Revenue is that the same should be availed in case the capital goods are in possession and in use of the manufacturer. The contention of Appellant is that as per the provisions of Rule the balance CENVAT Credit can be taken in the financial year subsequent to the financial year in which the capital goods were received if the capital goods are in possession and use of the manufacturer of the final product in such subsequent year. The main contention of Appellant is that as in the same financial year in which the balance of CENVAT Credit was availed the capital goods were put to use and this fact is not in dispute fact therefore the demand of interest and the finding of adjudicating authority that credit cannot be availed before the installation of the capital goods are not sustainable. For ready reference the provisions of Rule 4 of the CENVAT Credit Rules 2001 is reproduced below:-
RULE 4. Conditions for allowing CENVAT Credit. (1) The CENVAT credit in respect of inputs may be taken immediately on receipt of the inputs in the factory of the manufacturer:
Provided that in respect of final products falling under Chapter 62 of the First Schedule to the Tariff Act, the CENVAT credit of duty paid on inputs may be taken immediately on receipt of such inputs in the registered premises of the person who gets such final products manufactured on his account on job work subject to the condition that such inputs are used in the manufacture of such final products by the job worker.
(2) (a) The CENVAT credit in respect of capital goods received in a factory at any point of time in a given financial year shall be taken only for an amount not exceeding fifty per cent of the duty paid on such capital goods in the same financial year;
(b) The balance of CENVAT credit may be taken in any financial year subsequent to the financial year in which the capital goods were received in the factory of the manufacturer, if the capital goods, other than components, spares and accessories, refractory materials and goods falling under heading No.68.02 and sub-heading No.6801.10 of the First Schedule to the Tariff Act, are in the possession and use of the manufacturer of final products in such subsequent years.
7. The same provisions are in the CENVAT Credit Rules, 2002.
8. We have no dispute regarding the proposition regarding that the effect must be given to the clear meaning of the words as provided under the Statute or Rules. Appellant relied upon the decision of Tribunal in the case of Parasrampuria Synthetics (supra) the issue was in respect of denial of credit of duty paid on capital goods without their being installed in the factory. The Tribunal in Para 6 of the judgement held as under:-
Now the question remains to be considered is whether the remaining 50% of the Cenvat credit in respect of capital goods can be taken by the appellants in subsequent financial year, without the capital goods being installed/used. Sub-rule 2(b) of Rule 57AC deals with the provisions for taking the Cenvat credit in the subsequent financial years. As per this sub-rule, the balance of Cenvat credit may be taken in any financial year, subsequent to the financial year in which the capital goods were received in the factory of the manufacturer, provided that the capital goods are still in the possession and use of the manufacture of final products in such subsequent years. A perusal of sub-rule 2(b) of Rule 57AC makes it very clear that the balance 50% of Cenvat credit can be taken by a manufacturer and (ii) in use of the manufacture of final product in subsequent year. As admittedly the capital goods are not in use of the appellants in subsequent financial year, in which the balance 50% credit has been taken, the appellants were not eligible for the same.
In the case of Goyal M.G. Gases Pvt. Ltd. (supra) also taken the same view in Para 8 of the judgement.
In the case of Ispat Industries Ltd. (supra) the issue before the Tribunal was whether assessee can take credit of remaining 50% of duty paid on capital goods when capital goods was not put to use. In Para 12 of the judgement the Tribunal held that the worst allegation against the appellant could be pre-maturely taking credit thus entitling the Revenue to the interest on the same for use of credit during and between the period. These findings are in favour of Revenue and are applicable on the facts of present case.
9. We find as the Rule 4 of CENVAT Credit Rules specifically provides that the balance of CENVAT credit can be availed in the financial year subsequent to the financial year in which the capital goods were received in the factory of manufacture if the capital goods were in possession and use of the manufacturer of the final product in such subsequent year. Therefore we have to read the words possession and use together. In a case where the capital goods were in possession and credit has been availed but not put to use in the same financial year the credit cannot be availed. Further we find that Honble Rajasthan High Court in the case of Hindusthan Zinc Ltd. v. Dy. Commissioner of C. Ex. & Cus., Bhilwara (supra) relied upon by the Revenue held that firstly 50% Modvat credit could be availed on mere receipt of the capital goods in the factory and after the receipt of capital goods in the factory the subsequent installment of CENVAT credit could be availed in the subsequent financial year to the financial year in which the capital goods were received in the factory of the manufacturer provided that the capital goods are still in the possession and use of the manufacturer of the final product in such subsequent financial year. That only ensured that the capital goods received and installed by the assessee must be at least used for a reasonable period of more than one year in order to avail the full MODVAT/CENVAT credit. Further we find that the Tribunal in the case of Commissioner of Central Excise, Mumbai-II v. Fiat India Pvt.Ltd. (supra) after taking into consideration the decisions of the Tribunal in the cases of Ballarpur Industries Ltd., Parasrampuria Synthetics, Ispat Industries Ltd. (supra) relied upon by the Appellant held that the installment is pre-requisite for taking second 50% CENVAT credit on capital goods as provided under Rule 4 of CENVAT Credit Rules. In view of above disucssion we find no infirmity in the impugned order. The Appeal is dismissed.
(Pronounced and dictated in the open court.)
Sd/ sd/
(S.K. GAULE) (S.S.KANG)
MEMBER(TECHNICAL) VICE PRESIDENT
sm
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Appeal No.EDM-819/04